#### ENGLISH LUMBER COMPANY v. WACHOVIA BANK AND TRUST COMPANY.

(Filed 18 February, 1920.)

1. Appeal and Error — Reference—Findings.

Tbe findings of tbe court, wben passing upon tbe report of a referee, are conclusive on appeal wben based upon legal evidence.

2. Usury — Banks and Banking — Agreement—Deposits—Contracts.

Where tbe bank bas followed an arrangement made by its depositor tbat tbe latter keep a certain per cent of tbe money borrowed upon bis own paper and paper of its customers upon wbicb be remains responsible, and wbicb is good and collectible by tbe bank without trouble to it, and thus collects on tbe series of transactions a rate of interest in excess of tbe legal rate, tbe interest thus received is usurious and comes within tbe intent and meaning of tbe statute forbidding it.

3. Usury — Penalty—Limitation of Actions — Mutual Running Accounts— Statutes.

Where tbe bank, in following an agreement with its depositor, charges an usurious rate of interest upon loans made to him upon a continued series of transactions whereby it received at a certain discount upon tbe *212commercial papers of its depositor received by bim in tbe course of bis business, but upon wbicb tbe depositor remained bound, and tbe collection of wbicb was without trouble to tbe bank, and tbe usurious rate was by reason of an agreement tbat be keep a certain per cent of tbe money borrowed from tbe bank on deposit there, tbe transaction constitutes a mutual running account, and an action for tbe penalty under our statute is not barred within two years next from tbe last item therein. Rev., 396 (2).

Brown, J., dissenting.

Appeal by defendants from Bay, J., at tbe July Term, 1920, of BuNoombe.

Tbis is an action to recover tbe penalty for usurious interests alleged to bave been paid by tbe plaintiff to tbe defendant.

Tbe defendant denied tbat usury was charged or paid, and pleaded tbe statute of limitations.

A reference was ordered,'and upon tbe report being made, wbicb was in favor of tbe defendant, exceptions were filed by tbe plaintiff, and upon tbe bearing tbe material findings of fact and conclusions of law of tbe referee were reversed, additional findings made by tbe court, and judgment rendered in favor of tbe plaintiff, and tbe defendant excepted and appealed.

It appears from tbe findings of fact made by tbe court tbat in 1909 tbe plaintiff was engaged in tbe lumber business, witb its principal office in Asheville, and tbat in tbat year it began business witb tbe defendant bank; tbat, on 20 March, 1909, it was agreed between tbe parties tbat a line of credit should be allowed to plaintiff by defendant bank on different classes of paper discussed, but each item in each class be subject to approval by defendant bank, of $20,000, wbicb line of credit on tbe various classes was, by agreement between tbe parties, extended to more than $30,000, through tbe period of tbe transactions between tbe parties, and it was part of tbe agreement tbat tbe defendant bank would accept such of tbe plaintiff’s paper, as it approved of various classes, to tbe extent of tbe line of credit agreed upon from time to time, tbe plaintiff being required to pay 6 per cent interest for such money as it borrowed, and being required by tbe agreement to keep in tbe bank 20 per cent of tbe amount of tbe loans obtained from tbe bank on its customers’ notes discounted, and on tbe personal loans. It is found tbat tbe plaintiff did not keep an average of 20 per cent, in tbe bank, as agreed to, up to tbe beginning of tbe month of June, 1909, but it is found tbat in'consequence of said agreement tbe plaintiff did keep and maintain a balance of tbe money so borrowed, and attempted to keep 20 per cent, and tbe exact amount not being ascertainable from tbis record, tbe defendant’s estimate of not more than 6 per cent is accepted by tbis court; and tbe court finds tbat as much as 6 per cent monthly average was kept in said *213bank in consequence of said agreement up to tbe 1st of June, 1911, and by agreement between tbe parties, on tbe complaint of tbe bank tbat tbe average promised was not left, tbe defendant bank actually charged tbe interest upon tbe deficit, tbe amount of wbicb, for tbe different periods there shown, is in tbe sum of $216.65. Tbat this agreement to maintain 20 per cent balance on loans related to direct loans to tbe plaintiff on its own paper, and on customers’ notes discounted, but did not relate to demand loans on assigned accounts.

3. Tbat tbe plaintiff opened an account and began business with tbe defendant bank in March, 1909, and began to discount its customers’ notes or paper, pursuant to an arrangement made at tbe time with tbe defendant bank, and continued same thenceforward until it closed its business dealings with tbe defendant in 1913.

4. Tbat said plaintiff, beginning about 2 September, 1909, and continuing thenceforward until tbe close of its business dealings with tbe defendant bank, borrowed money from tbe defendant on its assigned invoices, or accounts receivable, as collateral security, from time to time, as its necessities required, and as shown in Exhibit A, as corrected by agreement of tbe parties, and agreed to pay, and did pay, and tbe defendant bank did receive from tbe plaintiff, in addition to tbe six per cent charged for tbe loan of tbe money, a charge of one (1) per cent upon 50 per cent of tbe face value of said accounts receivable, or invoices, so assigned, bandied, or collected by said bank, and continued to make and collect this additional charge from tbe date hereinbefore in this section mentioned, until January, 1910, when tbe charge was reduced to two-tbirds of one per cent upon tbe face value of said assigned accounts receivable, or invoices, and said loans thenceforward were limited in amount to two-tbirds of tbe face value of said accounts; tbat on a large portion of tbe transactions, as shown by Exhibit “A,” to wbicb this paragraph relates, tbe charge which was originally 1 per cent on the face of tbe invoice, and later two-tbirds of 1 per cent, and was often greater than tbe interest expected or received; that the accounts were, in at least 90 per cent of the cases, promptly paid, were generally known and easily ascertained to be solvent, were guaranteed by plaintiff, and required very little if any more attention than collateral loans upon other classes of paper; and said agreement was proposed by tbe plaintiff in order to get tbe accommodation of the loan, and tbe loan was granted because of tbe profit derived from tbe charge of the commission, which was an unreasonable charge, and was an attempted device by which the bank would receive a greater than 6 per cent income from its loans as the condition for making such loans; tbat there were almost daily transactions in tbe nature of loans or credits allowed by the bank, taken up by substituted notes, substituted demand notes on customers’ paper, all collateral, and *214on discounted customers’ paper, all covered by tbe agreement as to tbe line of credit, wbicb line of credit agreed upon from time to time was kept exhausted by tbe plaintiff, transactions being of practically daily frequence, each party keeping tbe whole of tbe accounts, tbe mutual items being so. interlocked as to make them practically inseparable. So that it was, and was assumed to be, an open mutual running account from 1 March, 1909, to tbe close of tbe transactions, tbe final settlement and payments being on 4 November, 1914.

There are other findings, but those set out are sufficient to a proper understanding of tbe legal questions presented.

Tbe action was commenced more than two years after tbe date of most of tbe items in tbe account, and within less than two years from tbe date of tbe final settlement.

His Honor held that tbe account between plaintiff and defendant was a mutual running account, and that tbe statute did not begin to run until tbe last payment made by defendant.

R. S. McCall, Pless & Winborne, and Murray Allen for plaintiff.

Bourne & Parker and Theo. F. Davidson for defendant.

Allen, J.

The findings of fact by the court are conclusive upon us as there is no exception that there is no evidence to support them (Eggers v. Stanbury, 177 N. C., 85), and they make out a case of usury against the defendant.

It is found as a fact that the charge of commissions of 1 per cent at one time, and two-thirds of 1 per cent at another “was an attempted device by which the bank would receive a greater than 6 per cent income from its loans as the conditions for making such loans,” which comes directly within the authority of Arrington v. Goodrich, 95 N. C., 467, which bolds that a commission charged for the purpose of securing more than 6 per cent interest was usurious, and the agreement requiring the plaintiff to keep on deposit a part of the money advanced, or to pay interest on the deficiency, in addition to a charge of 6 per cent interest, is expressly condemned in Bank v. Wysong and Miles Co., 177 N. C., 388, where the principle is fully discussed with ample citation of authority in support of the opinion.

Tbe remaining question is as to the correctness of the ruling on the statute of limitations, and this also is practically foreclosed against the defendant by the finding that there were “almost daily transactions in the nature of loans or credits allowed by the bank, taken up by substituted notes, substituted demand notes on customers’ paper as collateral, and on discounted customers’ paper, all covered by the agreement as to the line of credit, which line of credit agreed upon from time to time was kept exhausted by the plaintiff, transactions being of practically *215daily frequency, each party keeping the whole of the accounts, the mutual items being so interlocked as to make them practically inseparable. So that it was, and was assumed to be, an open mutual running account from 1 March, 1909, to the close of the transactions, the final settlement and payments being on 4 November, 1914.”

This brings the accounts between the plaintiff and defendant within the definition of a mutual running account as contained in Hollingsworth v. Allen, 176 N. C., 630, and other cases, and the statute of limitations does not begin to run on such accounts except from the last item in the account. Green v. Caldcleugh, 18 N. C., 323; Stokes v. Taylor, 104 N. C., 399; Stancell v. Burgwyn, 124 N. C., 71.

The principle is applicable to statutes of limitations generally, and, as there is no exception of an action to recover the penalty and as the right to bring such action is controlled by our statute of limitations (Rev., 396, subsec. 2), which provides that “an action to recover the penalty for usury” shall be brought within two years, it must be held that it applies to such actions, and it has been so held in other jurisdictions.

In Webb on Usury, sec. 209, the course of dealing between the plaintiff and defendant is described with much accuracy, and the conclusion reached that the lapse of time is not a bar. The author says: “In all cases regard must be bad for the statute of limitations, which, as will be seen, upon subsequent pages, may determine all the rights of the parties to the contract, including the debtor’s right to apply bis payments. But neither lapse of time nor the statute of limitations will affect a ease where the transaction was a continued one. ‘New dealings, new advances, new securities for money, mortgages upon the estate of the complainant, and some of the claims outstanding and unsettled, at the time of filing the bill, when taken together make out a case which neither time nor the statute of limitations can affect.”

Again, in Slover v. Bank, 115 Tenn., 347: “The bill was filed to collect usury upon a series of transactions on the 20th of March, 1905. It charges tbat the last usurious interest was paid on the 1st of March, 1901, and that there was a final settlement between the parties on the 4th of March, 1902, of all the transactions between them involving the usury.

“There was a demurrer filed, relying upon the statute of two years and the statute of six years; and it is insisted in this court that the demurrer should have been sustained on the ground that the action was barred by the statute of two years.

“There being a series of usurious transactions, the statute of limitations would not begin to run until these transactions were closed; and a settlement was made between the parties on the 4th of March, 1902.”

In Pickett v. Bank, 32 Arkansas, 347 (at page 355), it appeared that the firm of Wormley, Joy & Company, of which Pickett was a member, *216bad opfened a bank account witb the Merchants National Bank of Memphis, with whom they bad a running account for moneys loaned and checks paid, and credits for deposits and payments. The court held that this account, which commenced in 1866 and continued to 1868, constituted but one transaction. In the opinion in this case it is said: “So held under like circumstances by the Supreme Court of Tennessee in the case of Weatherhead v. Boyers, 7 Yerger, 545, and Poyers v. Boddie, 3 Hum., 666. In the first mentioned case Mr. Justice Pech said: ‘The transaction was a continued one, new dealings, new advances, new securities for money, . . . when taken, make a case where neither time nor the statute of limitation can have effect.’ The defense was usury, the precise question as to the time when the statute bar commenced, the transaction of advancements, payments, and settlements, extended for several years, and was held to be one transaction.”

We therefore conclude that tbe cause of action is not barred.

Affirmed.

Brown, J.,

dissenting: I cannot agree witb my associates upon tbe judgment rendered, as I am of tbe opinion that tbe penalties recovered in this case are barred by tbe statute of limitations.